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First Time Buyer Series · Part 2 of 8

How the bank decides what you can actually borrow

By Winfred Quek · CEA R073319H · Published 27 August 2026

Rates and thresholds change. The current figures are kept in one place: the Singapore property rules reference.

Facts verified: 27 August 2026 · Sources linked below

Ask ten first time buyers how much they can afford and most will answer with a feeling, a number they read somewhere, or their monthly pay times some multiple they half remember. None of that is how a bank actually decides. The real calculation runs on two ratios, a stress test rate, and a loan to value limit, and once you understand the mechanics, your budget stops being a guess.

TDSR: the 55% ceiling on everything you owe

The Total Debt Servicing Ratio caps your total monthly debt obligations, car loan, personal loan, any existing mortgage, plus the new mortgage you are applying for, at 55% of your gross monthly income. This is a regulatory floor set by MAS, so it applies identically at every bank in Singapore, whether you are buying HDB or private property. There is no negotiating a bank around it. For the full mechanics, see the TDSR stress test explained.

MSR: the stricter 30% cap for HDB and EC

If you are buying an HDB flat or an Executive Condo, a second and stricter ratio applies on top of TDSR. The Mortgage Servicing Ratio caps the mortgage repayment alone, not your other debts, at 30% of gross monthly income. Both ratios apply at the same time to HDB and EC purchases, and whichever one is more restrictive for your profile is the one that actually binds you. Private condo purchases only face TDSR, not MSR. See what MSR is and how it affects your loan for the full breakdown.

The stress test: why your real ceiling is lower than it looks

Here is the part that surprises most first timers. Banks do not calculate your TDSR and MSR headroom using your actual package rate. They apply a stress test interest rate floor of 4% a year regardless of what your package is actually priced at. So even if you are being offered a package well under that, the bank sizes your maximum loan as though you were paying the higher stress rate. That protects you if rates rise later, but it also means a quick calculation using today's headline rate will overstate what you can actually borrow. Buyers on packages well under the stress floor sometimes find their real borrowing capacity is meaningfully below what a naive calculation suggested.

LTV, downpayment, and the cash and CPF split

On a first bank loan, with no other outstanding home loan and a tenure within the usual limits, the Loan to Value (LTV) limit is 75% of the purchase price or valuation, whichever is lower. That means your downpayment is 25%, and at least 5% of the purchase price must be cash. The remaining 20% can come from cash or your CPF Ordinary Account. See the full condo downpayment breakdown for exact figures by price point.

An HDB concessionary loan works differently. It offers a higher LTV, 80% for resale flats and 90% for new BTO flats, at its own fixed rate, and because there is no 5% cash rule attached to it, CPF can cover the whole downpayment for many buyers. The trade off is a loan ceiling that behaves differently and a different rate structure. See HDB loan versus bank loan for when each makes sense.

What actually counts as debt under TDSR

TDSR is not limited to loans with a fixed monthly instalment. Car loans, personal loans, renovation loans, and education loans all count. Credit cards count too, generally through a formula applied to your outstanding balance or credit limit rather than just what you paid last month, which surprises buyers who assume they are debt free because they pay their card in full every month. If you stand as a guarantor on someone else's loan, that commitment can also be counted against you. Before applying for an AIP, it is worth listing every recurring commitment you carry, not just the ones that feel like "real" debt.

Variable income is treated conservatively too. Banks typically apply a haircut to bonus, commission, and rental income rather than counting it in full, and a shorter track record of that income being received can mean an even larger haircut. Self employed applicants usually need a longer run of Notice of Assessment history before a bank will size a loan around that income confidently. None of this is a reason to assume you cannot qualify, it is a reason to have the conversation with a banker early rather than budgeting off your top line income figure.

A worked example

This is illustrative only, to show how the pieces fit together. Your own numbers will differ.

Take a household with $8,000 gross monthly income and no other debt. Under TDSR, the ceiling on total monthly debt is 55% of $8,000, or $4,400. If this household is buying a private condo, with no other debt, that $4,400 becomes the effective ceiling on the mortgage repayment itself, stress tested at the 4% floor to translate into a loan quantum.

Now suppose the same household is buying an HDB flat instead. MSR applies, capping the mortgage repayment alone at 30% of $8,000, or $2,400, even though TDSR would have allowed $4,400. MSR is the stricter constraint here, so it is the one that actually sets the ceiling.

Then LTV sets the downpayment. On a $1,000,000 condo at 75% LTV, the downpayment is $250,000, of which at least $50,000 must be cash and the remaining $200,000 can be cash or CPF.

Part 1 of this series covers why getting this number before you view anything matters so much. Part 3 picks up from here to help you choose which type of first home actually fits your eligibility and this budget.

Frequently asked questions

What is TDSR and how is it calculated?

The Total Debt Servicing Ratio caps all your monthly debt obligations, including the new mortgage, existing loans, and minimum credit commitments, at 55% of your gross monthly income. It is set by MAS and applies identically at every bank in Singapore for every residential property loan.

When does MSR apply instead of or alongside TDSR?

MSR applies alongside TDSR, not instead of it, and only for HDB flat and Executive Condo loans, whether from HDB or a bank. It caps the mortgage repayment alone at 30% of gross monthly income. Both ratios apply at once, and whichever is more restrictive for your income and debt profile is the one that actually sets your ceiling. Private condo loans only face TDSR.

Why is my bank's indicative loan amount lower than I expected?

Banks calculate your TDSR and MSR headroom using a stress test interest rate floor of 4% a year, not your actual package rate. This protects you against future rate rises, but it also means your real borrowing ceiling is lower than a quick calculation using today's headline rate would suggest.

How much cash do I need upfront beyond the downpayment?

Beyond the 5% cash portion of your downpayment, you need cash or CPF for Buyer's Stamp Duty, due within 14 days of signing, and cash on hand for legal fees and any shortfall if the bank's valuation comes in below your purchase price, since that gap must be covered in cash and cannot be financed.

Can I use CPF for the full downpayment on a private condo?

No. On a first bank loan for private property, at least 5% of the purchase price must be paid in cash. The remaining 20% of the 25% downpayment can come from CPF Ordinary Account or cash. An HDB concessionary loan does not carry this 5% cash rule, so CPF can cover more of the downpayment there.

Earlier in this series

• Part 1 · Are you ready to buy

Sources & References

• MAS: Total Debt Servicing Ratio (TDSR) Framework
• MAS: Mortgage Servicing Ratio for Property Loans
• CPF Board: Using Your CPF to Buy a Home
• HDB: Flat and Grant Eligibility

Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H), CEA Registration No. R073319H. The information on this page is general in nature and does not constitute financial, legal, or investment advice, and is current as at 27 August 2026. Always verify the applicable rules with the relevant authority (HDB, CPF Board, IRAS, MAS, or URA) and consult qualified professionals before making any property decision.